TwentyOneEleven Posted July 31, 2006 Share Posted July 31, 2006 Homeowners braced for rise in interest rates(Taken from: AOL Money - 31 July 2006) Homeowners are braced for the possibility that interest rates could rise to 4.75% this week. Key data released in July which helps the Bank of England's Monetary Policy Committee (MPC) make its decision on rates was significantly stronger, suggesting a move is on the cards. Soaring gas and electricity bills drove inflation to its highest rate since Labour came to power in 1997. The Consumer Prices Index (CPI) rate of inflation leapt to 2.5% in June - up from 2.2% in May and ahead of the economy's forecast of 2.3%. This was well above the Bank of England's target rate of 2% and puts pressure on the MPC to bring inflation back under control. [snip] In addition, figures last week indicated that the UK economy grew by more than expected between April and June. The preliminary estimate of GDP showed a figure of 0.8% for the second quarter, slightly higher than most City expectations and stronger than the 0.7% rise seen in the previous two quarters. [snip] Combined with evidence of a pick-up in the housing market, Mr Walker said he believes "there is a more powerful case for a pre-emptive, precautionary tightening of monetary policy''... Hold on tight!!! Quote Link to comment Share on other sites More sharing options...
Marina Posted July 31, 2006 Share Posted July 31, 2006 (edited) Much as I would love a rise in interest rates all I can say is 'DREAM ON!' America is now talking about recession and the end of their interest rate rises. We're seeing the old 'consumer spending down' messages here in the UK. We've seen the pound increase against the dollar even though their rates have gone up and ours haven't. If the yanks drop in the near future, sterling will get even stronger - making imported goods cheaper - meaning inflation down again. You'll be lucky if you don't get rate reductions before the end of the year. Which will give this nutty housing market legs for another year or two. Which will allow BTL investors to buy up more of the housing stock - while you are still priced out. So you'll be a bit nearer 40 and you still won't have bought your first place. Oh, and another thing. You need to differentiate between inflation that is caused by higher spending and inflation of commodity prices and utility prices that squeezes people whose wages are not keeping up. Higher interest rates are used to control inflationary pressures caused by higher spending i.e. when the good times are rolling. Higher interest rates are not used just because things like commodity and utility increases are forcing prices up. Despite the endless government bullsh*t, we are not in good times. More and more people are feeling the pinch of higher council tax, higher tax, petrol, gas, electricity etc. So, rather than dampen spending, higher interest rates at the moment will simply cause more demand problems as people will have even less to spend. In this situation, normally, the pound is under pressure and higher interest rates are the medicene that must be taken. In the situation we are in now higher interest rates are not needed as the pound is so high against the dollar. You can forget rises in interest rates. Edited July 31, 2006 by Marina Quote Link to comment Share on other sites More sharing options...
OnlyMe Posted July 31, 2006 Share Posted July 31, 2006 How can something be pre-emptive and precautionary when real inflation is already outstripping wages, debt is still growing at record rates and consumers looking to go on another binge on credit cards? Quote Link to comment Share on other sites More sharing options...
Sparker Posted July 31, 2006 Share Posted July 31, 2006 (edited) Much as I would love a rise in interest rates all I can say is 'DREAM ON!' America is now talking about recession and the end of their interest rate rises. We're seeing the old 'consumer spending down' messages here in the UK. We've seen the pound increase against the dollar even though their rates have gone up and ours haven't. If the yanks drop in the near future, sterling will get even stronger - making imported goods cheaper - meaning inflation down again. You'll be lucky if you don't get rate reductions before the end of the year. Which will give this nutty housing market legs for another year or two. Which will allow BTL investors to buy up more of the housing stock - while you are still priced out. So you'll be a bit nearer 40 and you still won't have bought your first place. You're a bundle of fun. Bet you get loads of invites to dinner. The press and the analysts have effectively give the green light for a rate increase. Ed Balls and GB have both given the green light for a rate increase. Global interest rates are rising. UK inflation is at it's highest point for nearly 10 years - 0.5% above target. Interest rates SHOULD go up this week. Edited July 31, 2006 by Sparker Quote Link to comment Share on other sites More sharing options...
Marina Posted July 31, 2006 Share Posted July 31, 2006 You're a bundle of fun. Bet you get loads of invites to dinner. The press and the analysts have effectively give the green light for a rate increase. Ed Balls and GB have both given the green light for a rate increase. Global interest rates are rising. UK inflation is at it's highest point for nearly 10 years - 0.5% above target. Interest rates SHOULD go up this week. But, as I said, the inflation we are suffering is caused by utility prices, commodity prices etc. It is not caused by higher spending. So rises in interest rates are not needed - particularly as the pound is already high against the dollar and the Fed are talking about the end of their tightening cycle. Interest rates WON'T go up this week. Quote Link to comment Share on other sites More sharing options...
the end is a bit nigher Posted July 31, 2006 Share Posted July 31, 2006 But, as I said, the inflation we are suffering is caused by utility prices, commodity prices etc. It is not caused by higher spending. So rises in interest rates are not needed - particularly as the pound is already high against the dollar and the Fed are talking about the end of their tightening cycle. Interest rates WON'T go up this week. the pound is up agaist the dollar BECAUSE we are expected to raise IRs higher spending itself does not cause inflation and certainly won't force a move in IRs as we have seen over the past few years I agree that we probably won't see a rise this week but I thik September is nailed on barring any economic disaster in the next month Incidentally, Bootle has just been on Bloomberg and his view is that the next move may well be down Quote Link to comment Share on other sites More sharing options...
TwentyOneEleven Posted July 31, 2006 Author Share Posted July 31, 2006 (edited) Reuters (28/07/06) - Bank of England urged to raise interest rates The economy is picking up faster than expected and with inflation likely to remain above target for some years, the Bank of England should raise rates sooner rather than later, a think-tank said on Friday. NIESR expects the central bank to raise borrowing costs by a quarter point from their current 4.5 percent by the end of this year, with a further hike in 2007, but said conditions warranted a move sooner than that. "There's little to be gained by delaying the rise until late in the year," NIESR Director Martin Weale, told a news conference. "Given that we have inflation staying above target and given rates are expected to rise I cannot see a strong case for waiting." Incidentally, Bootle has just been on Bloomberg and his view is that the next move may well be down Coincidence then that he wasn't at the last Shadow MPC meeting where the majority voted for a rise and nobody voted for a cut? Edited July 31, 2006 by TwentyOneEleven Quote Link to comment Share on other sites More sharing options...
Fancypants Posted July 31, 2006 Share Posted July 31, 2006 Incidentally, Bootle has just been on Bloomberg and his view is that the next move may well be down hasn't Bootle recently been shunted from the Times and replaced with a younger model? I guess they know which way the wind is blowing (out of his behind). Quote Link to comment Share on other sites More sharing options...
Realistbear Posted July 31, 2006 Share Posted July 31, 2006 Not until Gordon is in No. 10 and TB is president of Europe! Barring a cataclysmic economic event that is. Quote Link to comment Share on other sites More sharing options...
Zzzzzzzzzzzzzzzzzzzzzzzzzz Posted July 31, 2006 Share Posted July 31, 2006 I suspect we'll see a rate rise - but NOT this month - at the moment, I'd put my money on a September rise. G Quote Link to comment Share on other sites More sharing options...
crashmonitor Posted July 31, 2006 Share Posted July 31, 2006 The Bank should show some strength vow and raise immediately.If it fails,despite all the CPI and GDP evidence,the international money markets will see it as a toothless political pawn.A 1992 style run on the pound is also a possibility. Quote Link to comment Share on other sites More sharing options...
Realistbear Posted July 31, 2006 Share Posted July 31, 2006 The Bank should show some strength vow and raise immediately.If it fails,despite all the CPI and GDP evidence,the international money markets will see it as a toothless political pawn.A 1992 style run on the pound is also a possibility. IMO Gordon would not mind seeing sterling 10% lower (it has risen by that much against the $ in the last 3 years in any event.). The choice between a HPC and run on sterling is a no-brainer for Gordon--there is NO way he is going to push the house market over edge as he promised no more boom and bust in house prices. He got his boom and now he has got to avoid the bust--at any cost. If we get a HPC while he is still in No. 11 his political future is over. O-V-E-R. Quote Link to comment Share on other sites More sharing options...
iLegallyBlonde Posted July 31, 2006 Share Posted July 31, 2006 They are all having a good whinge in our office right now and somebody is about to remortgage, he's been told to get a fixed rate. Having trouble stopping the smirk from creeping accross my face ! Quote Link to comment Share on other sites More sharing options...
Sledgehead Posted July 31, 2006 Share Posted July 31, 2006 How can something be pre-emptive and precautionary when real inflation is already outstripping wages, debt is still growing at record rates and consumers looking to go on another binge on credit cards? Indeed. Whether you believe there will be a rise or that there won't, the whole article displays a frightful lack of understanding: Homeowners are braced for the possibility that interest rates could rise to 4.75% this week...Combined with evidence of a pick-up in the housing market Will somebody explain how participants in a market can be both braced for a bearish event, yet bid that same market up? Utter twaddle. the pound is up agaist the dollar BECAUSE we are expected to raise IRs How can you say this for sure? Could the relative dollar fall not be equally attributed to retreating likelihood of further US rises? Quote Link to comment Share on other sites More sharing options...
onrollover Posted July 31, 2006 Share Posted July 31, 2006 Sledgehammer, I read your thing on your sig about realistbears profession, but frankly I find it confusing, what exactly did he lie about? Quote Link to comment Share on other sites More sharing options...
Sledgehead Posted July 31, 2006 Share Posted July 31, 2006 (edited) Sledgehammer, I read your thing on your sig about realistbears profession, but frankly I find it confusing, what exactly did he lie about? what you do for a living is your profession, okay? He has also lied about me being anti-semetic and a troll, amongst other things, but I can't see how I'm to disprove those things if folks won't accept that making a living at something => being a professional something Think you might be leading us OT again.... Edited July 31, 2006 by Sledgehead Quote Link to comment Share on other sites More sharing options...
othello Posted July 31, 2006 Share Posted July 31, 2006 Marina I assume you are a disillusioned bear who has lost all belief that the housing market may collapse. I would say there is more than a 70% chance of interest rates going up this month and whilst there may not be a 'crash' (whatever that actually means) before the end of this year I feel there is a strong change of strong falls in the latter part of this year and into next year. "Only when the last bear has turned bull will the bubble burst". Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted July 31, 2006 Share Posted July 31, 2006 Marina I assume you are a disillusioned bear who has lost all belief that the housing market may collapse. I would say there is more than a 70% chance of interest rates going up this month and whilst there may not be a 'crash' (whatever that actually means) before the end of this year I feel there is a strong change of strong falls in the latter part of this year and into next year. "Only when the last bear has turned bull will the bubble burst". There is a difference between demand led inflation and price driven inflation. They demand different solutions too. Raising IRs is normally done to take out excessive demand, not to tackle high, external impacts e.g. energy costs. Quote Link to comment Share on other sites More sharing options...
Sledgehead Posted July 31, 2006 Share Posted July 31, 2006 There is a difference between demand led inflation and price driven inflation. They demand different solutions too. Raising IRs is normally done to take out excessive demand, not to tackle high, external impacts e.g. energy costs. ... but you would doubtless agree that high oil prices are a function of demand .... Quote Link to comment Share on other sites More sharing options...
dnd Posted July 31, 2006 Share Posted July 31, 2006 (edited) There is a difference between demand led inflation and price driven inflation. They demand different solutions too. Raising IRs is normally done to take out excessive demand, not to tackle high, external impacts e.g. energy costs. I'd say we currently have both of those catagories in the form of low-interest credit for consumers and energy prices... I take it we apply both solutions to these problems simultaneously? Edited July 31, 2006 by dnd Quote Link to comment Share on other sites More sharing options...
Casual Observer Posted July 31, 2006 Share Posted July 31, 2006 ... but you would doubtless agree that high oil prices are a function of demand .... They are a function, of course, but the current spike is due to external impact which could end tomorrow, regardless of demand. Quote Link to comment Share on other sites More sharing options...
Sledgehead Posted July 31, 2006 Share Posted July 31, 2006 They are a function, of course, but the current spike is due to external impact which could end tomorrow, regardless of demand. ... and in talking about the market price of oil, I'll forgive you for not adding: "imho" Quote Link to comment Share on other sites More sharing options...
Marina Posted July 31, 2006 Share Posted July 31, 2006 Indeed. Whether you believe there will be a rise or that there won't, the whole article displays a frightful lack of understanding: Will somebody explain how participants in a market can be both braced for a bearish event, yet bid that same market up? Utter twaddle. How can you say this for sure? Could the relative dollar fall not be equally attributed to retreating likelihood of further US rises? They can say it for sure because it is what they want to believe. Simple as that. Currency market wise, there is lots of scope to cut rates without any significant problems. I'd say we currently have both of those catagories in the form of low-interest credit for consumers and energy prices... I take it we apply both solutions to these problems simultaneously? I don't think there is much, if any, demand led inflation. No matter how much people MEW for new cars and holidays etc - most things you buy are subject to the same, ruthless, market competitiveness that now pervades our society. I would say, for example, that the typical conservatory (on which MEW is often spent) is no more expensive than it was 10 years ago. You can buy a DVD player for ten bob these days. Not so long ago they used to be 10 quid. If they go up a few percent they will still be nowhere near as expensive as they were just a couple of years ago. Quote Link to comment Share on other sites More sharing options...
Scooter Posted July 31, 2006 Share Posted July 31, 2006 I suspect we'll see a rate rise - but NOT this month - at the moment, I'd put my money on a September rise. G I agree about timing. As for "braced for the worst" I suspect most homeowners have not got a clue and do not understand inflation, interest rates or money supply. Quote Link to comment Share on other sites More sharing options...
gordonbrown Posted July 31, 2006 Share Posted July 31, 2006 (edited) They are a function, of course, but the current spike is due to external impact which could end tomorrow, regardless of demand. What bothers me is that it is cheap imports and labour which have allowed this period of stability and low interest rates. Very little to do with our own relative economic performance. Those trends are now reversing as more of the work and wealth moves to the poorer countries. In the same way as inflation and interest rates were held low by globalisation I don't see any reason to assume the reverse will not also be true. I am still not convinced that our sanguine approach, letting all the industry and money go abroad, is entirely without price. Relying on Johnny foreigner to support us by buying our financial expertise is also suspect. He is a cunning blighter and will no doubt work out how to spend his own money eventually. Although they never worked out how to make a decent biscuit admitedly. Pip pip. Edited July 31, 2006 by gordonbrown Quote Link to comment Share on other sites More sharing options...
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